MarketsMOJO Downgrades Accel to 'Sell' Due to High Debt and Low Profitability

Accel, a microcap IT hardware company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 14, 2024. This downgrade is based on several factors, including the company's high Debt to EBITDA ratio of 7.35 times, indicating a low ability to service debt. Additionally, the company has only been able to generate a low Return on Equity (avg) of 3.51%, showing a lack of profitability per unit of shareholders' funds.
Technically, the stock is currently in a Mildly Bearish range, with the technical trend deteriorating from Mildly Bullish on October 10, 2024. The key technical factor, MACD, has also been Mildly Bearish since October 10, 2024. In the last year, the stock has underperformed the market, with a return of only 15.06% compared to the market's (BSE 500) return of 35.61%.

However, there are some positive factors to consider. The company has shown healthy long-term growth, with Net Sales growing at an annual rate of 83.83% and Operating profit at 38.77%. In June 2024, the company also reported higher PAT (9M) at Rs 3.45 Cr. Additionally, with a ROCE of 7.8, the company has an attractive valuation with a 1.6 Enterprise value to Capital Employed. The stock is currently trading at a discount compared to its average historical valuations.

It is worth noting that while the stock has generated a return of 15.06% in the past year, its profits have risen by 23.6%, resulting in a PEG ratio of 1.6. The majority shareholders of Accel are the promoters, indicating their confidence in the company's future prospects. Overall, while there are some positive factors, the current financial and technical indicators suggest that it may be wise to sell Accel stock at this time.